By Danyaal Raza, M.D., M.P.H. and Karen S. Palmer
Toronto Star, April 9, 2024
Private equity investment firms exist to make money for their investors. It’s their job. Over the past decade, private equity firms around the world have increasingly invested in the health care industry, including Canada’s long-term care sector and a growing number of private for-profit surgical centres.
Private equity firms are investment management companies. They buy other private companies with the intent to improve their performance, often selling them again a few years later at considerable profit to their shareholders.
In Canada, a single private equity firm already owns the largest national network of independent surgical centres — 53 operating rooms spread across 14 centres — in Quebec, Ontario, Manitoba, Saskatchewan, Alberta, and B.C.
Surgeries performed in these surgical centres are funded through a mix of public and private payments. Approximately 90 per cent are publicly funded through partnerships with provincial health systems. The remaining 10 per cent are private pay, including through private insurance or out-of-pocket for those who can afford it.
Some of that money is used to pay for patient care, but some — our public dollars — is extracted to enrich shareholders who expect a return on their investment.
Should profit-driven investors own health care facilities? Does it even matter, so long as patients get care?
Yes, it does.
Studies show that private equity ownership is associated with worse quality of care — such as a substantial increase in infections, falls, and other adverse events — and higher costs of health services around the world, including in the U.S., U.K., Sweden, Netherlands, and Germany.
Private equity ownership turns health care from a social good into a financial asset, extracting wealth for investors. There is no evidence that private equity ownership leads to systematic improvements in care. The primary focus is on financial gain for shareholders.
It’s not just surgical centres that are owned by these firms. Private equity has also scooped up nursing homes in Ontario, raising alarms about cost and quality of care. Tragically, these care homes had the highest mortality rates during the emergency phase of the COVID-19 pandemic and those with the highest profit margins suffered the lowest quality of care.
Although private equity ownership of Canada’s health care system is relatively new, it has become a mainstream and troubling phenomenon in the U.S. So much so that 25 per cent of U.S. hospital emergency departments are now staffed by private equity-owned staffing firms. Many worry that the growing financialization of health care inserts corporate values into treatment, raising concerns about the corporate practice of medicine.
Even the U.S. Federal Trade Commission has taken notice. For the first time ever, it is suing both a medical group and its private equity backers, alleging anti-competitive practices that drive up the cost of health care. Their concern is that this can exert pressure on health care professionals to “subordinate their own medical judgment to corporate decision-makers’ profit motives at the expense of patient health.”
Private equity firms are opaque and secretive. They don’t have to publicly disclose information about their finances, operations, business risks, or legal liabilities. Canadians are asking: What mechanisms are in place—like anti-trust and anti-competition legislation, regulation, and enforcement mechanisms — to guard against consolidation and the harms from monopoly corporate ownership and control of our health care delivery system?
Private equity ownership of the places where we seek care risks undermining cost, quality, access, efficiency, and equity. If we aspire to building a health care system that meets the demands of 21st century medicine, we must put in safeguards to ensure that corporate ownership, including by private equity firms, does not undermine all that we value in our health care system.
Dr. Danyaal Raza is a family physician at St. Michael’s Hospital, Unity Health Toronto and past chair of Canadian Doctors for Medicare. Karen S. Palmer is an adjunct professor at Simon Fraser University and University of Toronto and policy advisor to Canadian Doctors for Medicare.